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Friday, Sept. 4, 2009 | As Los Angeles begins to reign in the latest wildfire in Southern California and assess its losses, San Diego is still facing the consequences of its scorched earth nearly two years ago.

San Diego Gas & Electric is requesting several rate increases to help cover insurance increases and liability costs related to the 2007 fires. The utility is also proposing a controversial shut-off plan, which state officials will vote on next week.

I sat down with SDG&E Chief Operating Officer Michael Niggli to talk about wildfire preparation in San Diego County, rate increases, criticism of the shut-off plan and the commission’s upcoming vote.

The utility has made some changes and proposals since the 2007 fires. How do you think our local governments have handled their resources since the fires?

We’re seeing the county and government agencies under tremendous financial pressures and it’s hard for them to allocate more money into this. It’s hard for us to allocate more money into this, too, but we are re-prioritizing our activities to put this as a priority for us, to reduce the potential for wildfires to happen.

From a policy standpoint, one of the things we’ve found since we started the emergency shut-off program is that it has shined a light on emergency preparedness throughout the county. It shined a big light and everybody has to look in the mirror and ask, ‘How well am I prepared?’

The shut-off plan, based on the rhetoric that’s been published, sounds like SDG&E’s been backed into a corner and this is a last resort. Is that how the utility is approaching it?

I think we would all feel better if all the entities involved would have done more in the county for preparedness. I feel that as a county we have not made big strides in additional fire preparedness and that we all need to be better prepared.

We think about the shut-off plan as a last resort only because we have done all these other activities as part of our community fire safety program.

It’s not in our DNA to turn the power off. It’s not something we do willingly or frequently, given our No. 1 ranking in the western U.S. We like to keep our reliability very high for our customers. Having an impact on 8,000 to 10,000 people once or twice a year to benefit 3 million people in the county is something we think is a good trade off.

Criticism of this project has sometimes surrounded those who would be highest at risk, such as the medically ill or elderly. How are you staying in contact with the people who might be affected?

We’re paying a lot of attention to the elderly and medical baseline customers that we have, because they are generally the ones who are most at risk or would be least able to help themselves. What we’ve done is try to make them well aware of the program with multiple contact points.

You would have had seven, eight or nine contacts already. It’s ironic, but some of our customers who have not responded have finally responded and said “please don’t send me anymore.” …

Out of 950 medical baseline customers, there’s about 80 that have not responded. I think we’ve done a very good job of contacting virtually everybody, and I think you’ll find the awareness levels are very high about what we’re attempting to do with the program.

Of those 950, 34 have called back and said they want transportation to our care center. Two have called back and said they want transportation via an emergency medical vehicle. … Later this month we’ll have 24 of [our care centers] available should we have to call an event.

In reviewing this plan, critics have made the point that a shut-off plan would not actually reduce the number of ignition points in the backcountry, because it would create new avenues through people forced to use generators, outdoor grills, candles, etc. Do you agree that the shut-off plan is then a way of protecting the utility from liability?

If you protect the utility from liability, you protect all of our customers, because at the end of the day, our cost of doing business is supported by our customers. One of the points here that people sometimes miss is the fact that if we can keep down the costs associated with any liability we have, we keep down the customer costs.

Now the issue about sort of shifting liability — if we’re preventing our fires, somebody else may cause one — that can always happen. I think it’s important that everyone takes personal responsibility and everyone be personally responsible for their own actions and if you’re lighting candles, you have to be careful. If you’re running a generator, we send our generator DVDs on safety, we do discussions in the backcountry at the fire stations about generator safety. What’s interesting is that just under 40 percent of the backcountry have generators already. We’ve done a survey on that and it’s been very surprising how many have them, but many of them should already know how to operate them in those kind of situations.

I think the other kind of personal responsibility is that you have to clear brush from your home. People have to do that and if they do that, they generally won’t have a problem.

Out of the 2007 fires, you saw expenses to repair the system and cover liability costs. Out of those events, you requested a couple rate increases to help cover the costs. How do you see those rate increases fitting into the utility’s new outlook on fire protection?

What has happened here in the last couple years, actually in the last decade, is that all of Southern California has become much more at risk for fires. We saw that in 2003. We saw that in 2007 from all different areas, and the insurance community is taking note of that. Whenever claims come by, like when a hurricane goes through Florida, the rates go up. The rates of insurance for ourselves and others are starting to skyrocket and this is really spiraling upward.

Our cost of getting insurance has always been part of our rates. We do a rate case, we tell the commission how much our insurance costs and they allow us to recover the prudently spent insurance cost. So now in the last year, the insurance costs have gone up three or four times … and the coverage levels have come down by two-thirds.

Rather than the shut-off plan, people have suggested the utility should be doing more to maintain its facilities. How do you explain that those are not always viable options?

More of it could possibly be done. The question is at what cost versus the benefit. We’ve actually started to harden the circuits that are most vulnerable first. We’re going through this year and we’re probably spending well over $100 million on steel poles … and we’re not done.

But putting steel poles (everywhere) would not be effective, like in the tree line. You still get some of the same problems. The real benefit in those areas would be putting them underground. If you underground, you take away the physical element risk that we have today. Undergrounding may cost you 10 times what an overhead facility costs. So, you have to be in a position to find a tremendous benefit if you’re going to underground.

… The question becomes where can you get the biggest bang for your buck in doing some of these things. We clearly see that you cannot harden the system and implement this (community fire safety program), unless you want to spend billions and billions of dollars, and it would be billions and billions of dollars.

Turning to the decision coming next week, how do you describe what the utility will be facing if the shut-off plan is not approved?

It depends on how they would take that action. … If clearly they would not want us to pursue this program, we would have to come back with another program or something that frankly could be a lot more expensive than what we’re doing, but maybe it meets the test that everybody else has. The fact that it might get turned down could lead to something different that also may be more expensive. We happen to think this is a complex effort that covers a lot of ground effectively.

(After the interview, Niggli told the North County Times the utility would likely challenge the approval of either proposal currently before the commission.)

Would a different proposal also include shut-off options?

I can’t predict that. I wish I could predict that, but I just can’t right now. A lot may depend on what guidance we get from the commission. We are very hopeful that they will approve this program, primarily because we have the authority today and we see what has happened with climate change. We are in a new day, and we have to take new measures that have not been taken before so these types of catastrophic events are minimized.

As you move forward with this proposal, who do you see as the people you still need to convince?

We have 3 million people who will either benefit or not benefit from the action taken next week by the commission. The people that have to be convinced now are three of the five commissioners of the utilities commission in San Francisco.

— Interview by KEEGAN KYLE

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